How I invested in US property using my Super

Hi Everyone!

I’m a newbie to the forum and wanted to share my story for others to be inspired. My wife and I are originally from the UK and migrated over to Australia about 5 years ago and something tells me I won’t be going back to the cold anytime soon lol. We both work in the IT sector and fortunately got jobs fairly quickly which was a relief and wanted to explore Australia and all it has to offer. Anyways, property caught my attention here as so many people spoke about it and the fact that it's plastered across the news, so It’s difficult not to miss; which kicked started my interest into real estate investing.

One day it occurred to me that I have funds sitting in my Super that are currently invested into a Super Fund, achieving around 8% return. After some research, I came to realise that I had the option of investing it into other types of Super funds such as Industry, Retail, Corporate, Public etc but the returns were hovering around the 10% mark, which although sounds good, I thought to myself that there must be a way to generate better returns. I even considered Shares but it felt much risker to me as it can be quite volatile unless you know what you’re doing.

After delving further, I came across stories and people who had invested in Australian property using their SMSF, which sparked my interest. However, the loan interest rates were too high and lending seemed to be quite tight if considering to use your SMSF. There seemed to be a lot of complexity involved if taking out a loan via your SMSF, and even if I did pursue it, the overall yields were quite low with Australian property, ranging between 4% to 6%. On top of all that the property market has been declining/correcting in Sydney/Melbourne since the boom, and other markets seem to be stagnant as of lately.

Personally this didn’t seem worthwhile so I researched a little more and came across people who had successfully invested in the US market, showing crazy returns in Detroit of around 20%+ with the added bonus of capital growth in the short term, due to the market being so HOT right now! I read up about how much money was being pumped into Detroit by businesses and even the government to revive the city and improve its economy, of which has been evident for the past year. So it was a no brainer! I made the decision to jump on that bandwagon and get my foot onto the US property ladder and am so grateful that I did!

After setting up my SMSF, I managed to buy two properties (which is still crazy to believe that I’ve bought in the US):

• Property 1 (Detached 3 bedroom, 1 Bath, 1 Garage) = Purchase Price of $38k AUD, Rental Income = $1200 AUD per month, giving a whopping 37% gross yield - I got lucky with this one as it was bought earlier this year so this type of yield is rare to come by, as its usually around the 25% mark, as with my second property below. After deducting the renovation costs, and all other expenses including maintenance, this equates to a very high NET YIELD of 20% which I’d never find in Australia.

• Property 2 (Detached 3 Bedroom, 1 Bath, 2 Garage) = Purchase Price of $48k AUD, Rental Income = $1000 AUD per month, yielding at 25% gross. The rent is currently below market value, so at the end of the lease this will increase to equate to a gross yield of 28% bringing the NET YIELD to 19%

Not only am I receiving Net Yields of around 20%, I have the added bonus of capital growth which will enable me to sell down and use the funds to potentially purchase another 2 high yielding properties, all within my SMSF!

I am forever grateful to those who have provided the guidance I needed to take me on this path, based on their own success stories in the US and I'm really excited to see the future outcomes of this journey

 

I'll be very interested to follow this, so please keep us updated!
I truly wish you all the best, but I'd be at least somewhat worried about investing in Detroit.
How much are you paying in management fees, rates, etc?

 

Some great results there @mistrys - Have you also been advised on the risks/effects of currency fluctuations? The AUD/USD has been heading south but has stablilised around the $0.70USD mark, how are your results going to look if/when the AUD recovers to $0.75-$0.80USD?

A few others on the site have also gone to the US early on in the cycle and have also done astonishingly well too. The risk has paid off.

 

Hi
Few questions:

1. Did you used any help or support? A lot of people are currently spruiking deteoit market.

2. How id you complete the due diligence, especially with mixed reviews on the area. From one neighborhood to another, there is a drastic change.

3. What about tenants. Are they under section 8c?

4. How did you manage the renos and who are managing it under?

5. Are the fees upro 10% of the gross rent. What are the difderent charges?

Regards

 

Thank you

Management fees are usually between 8 to 10% and rates are around $1500 AUD per year.

I'll certainly provide an update on my properties, although they have already risen by 10-15% this year, which is awesome!

 

We'll have to wait and see what happens but I believe the yields would still remain higher than my other options. Also I have the added bonus of the capital growth! Like you said, the risk has paid off for other US investors so it must be worthwhile to be a part of this

 

Sounds good, almost too good,
Care to share the property address'?

 

Hi,

I have a US contact that sources the properties including reno's etc. I don't currently have any Section 8 tenants, however I wouldn't hesitate to use them as it will increase the cashflow as the rent is typically higher by about 12%.

Have you done any research in US investing? It would be good if you could share what you've learned?

 

Hi,

As its in my SMSF, I'd prefer to keep the full address private, I hope that's ok? However to give you an idea the block is 92XX Rutherford Street in Detroit.

 

Hi Geoffw,

This applies to any city/country, whether its the US, Australia or the UK, as long as you have great PM's it can make a huge difference, of which do exist in the US. It's been smooth sailing thus far with great communication, which is the key to maintaining a good relationship. I'm kept updated and can leave it in the hands of the PM to handle everything.

Haha yes, my other thread was about an Australian property

 

Thanks for sharing,it’s great to know your Detroit properties are performing well.Do you find it’s hard to collect rent in Detroit?I currently own three properties in Detroit,but 3 out of 3 properties are having issue with rent collecting,the tenants are far behind or just not paying.And you need file the court order to evict them,very time it cost me more than$200.I need pay the insurance,maintenance cost,property management fee ,inspection fee ext.Feeling bit frustrated about the market there.Its great to know someone else’s investment is doing well.

 

Thats a shame that you're having some issues, but I honestly haven't any problems, I guess I've been fortunate to have found good tenants.

 

This could be a property management issue as much as a tenant issue.

 

I came across this article today which shows promising signs for Detroit

20,000 Detroiters signed up for more FCA job information

 

Keen to share the company you used to find/purchase those properties?

I'm keen to try US market but my partner is still a bit sceptical. Those numbers though are great!

Thanks!

 

Yes I agree.this is the second property management company I use , the first property manager is really bad never reply calls or emails ,never give you any update.The second company will reply email,but never give you heads up about repair cost and never let you know the tenant didn’t pay rent,but they did run a tenant selection and screen though.Overall I feel they are not very competent and not responsible for the landlord ,my buyers agent don’t do business with them anymore so I’m on my own.I never experienced this kind of poor service,my PM in Atlanta is way much better.I talked to another investor who owns properties in Detroit as well,we both agreed Detroit is tough market.

 

I did much the same but in europe. And using a SMSF loan. At 2.2% interest. 3 apartments at 30% yield. 100% occupancy at short stay rental rates with mega demand. A niche market. Going there to look at 2 more in a few weeks. Thank you ALP

 

Thats Great! Well done on making the most out of your SMSF.

How much does your Net Yield come to, for each apartment?